U.S. stocks advanced for fourth day as concerns over Fed move ease

07:49, February 20, 2010      

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Wall Street pared its losses and ended higher for the fourth straight day on Friday as investors shrugged off the Federal Reserve's unexpected discount rate hike.

The Dow Jones added 9.45, or 0.09 percent, to 10,402.35. The Standard & Poor's 500 index gained 2.42, or 0.22 percent, to 1,109. 17 and the Nasdaq was up 2.16, or 0.10 percent to 2,243.87.

For the week, both the Dow and S&P achieved a gain of over 3 percent, while the technology-heavy Nasdaq rose 2.8 percent.

Major averages followed global market and opened lower on Friday after the Federal Reserve announced to raise its discount rate, the rate Fed charges banks for emergency loans, by 0.25 percentage point to 0.75 percent late Thursday. Although investors had expected such a move in the near future, Fed's decision still came earlier than average anticipation.

However, the market turn positive before noon, boosted by financial sector, as some investors interpreted Fed's move as a sign that banks are strong enough to operate without more privileges at the discount window.

Meanwhile, some Fed officials reassured the market by saying the increase to the discount rate is not a move to raise the more closely watched federal funds rate.

Federal Reserve Bank of New York President William Dudley said the discount rate increase "is not at all a signal of any imminent tightening" in monetary policy, but only "a very small technical change."

In addition, the market was also boosted after the government issued an encouraging report on inflation.

According to the Labor Department, the consumer-price index increased 0.2 percent for a fifth straight month, led by higher fuel costs. However, the core CPI, which excludes volatile energy and food prices, unexpectedly fell 0.1 percent. It was the first time since 1982 for the index to fall, indicating the recovery is showing few signs of inflation.

Source: Xinhua
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